Description

Background

NeuBase (NBSE) focuses on developing the next generation of gene silencing therapies to treat rare genetic diseases caused by the expression of mutant proteins. The company is an emerging leader in the development of mRNA-targeted drugs called peptide nucleic acids (PNAs) with its proprietary gamma Peptide-nucleic acid AnTisense Oligonucleotide (PATrOL) platform that has broad applicability across a range of neurodegenerative, oncology, and rare disease indications. The company went public via reverse merger in July 2019 when it announced the completion of the merger between NeuBase Therapeutics, Inc. and Ohr Pharmaceutical, Inc., and the combined company changed its name to “NeuBase Therapeutics, Inc.”.

            This write-up will be concise as the company is a pre-revenue biotech with great prospects. Despite being an early-stage biotech company, we see parts of the NeuBase platform as risk-mitigated and collectively contributing to a next-generation iteration of ASOs, known as peptide nucleic acids (PNAs), with meaningful improvements on an approach with proven life-changing capabilities. The PNA platform has been around for decades, but NeuBase has both optimized the target recognition and cell permeability. IND enabling studies are slated to begin in 2021.

As a micro-cap (under $200mm market cap), NBSE is a speculative company whose likely outcome is binary with a heavy skew towards succeeding vs. heading to zero. Moreover, by shoring up its IP portfolio recently, we believe NBSE has effectively put in a back stop at which an industry player would likely acquire NBSE if the stock languishes and their development progress does not proceed at the expected rapid pace. In a nutshell, NBSE’s recent dramatic fall from nearly $13 per share in early February to last night’s close of $5.88 per share reflects market awareness of a clear need for the company to raise funds, along with a risk-off mindset for the group. The stock also had the benefit of David Einhorn’s mention in his 4Q 2020 Greenlight investor letter update touting the company. After the quick ascent and the subsequent plummet on aggressive selling, NBSE completed a secondary offering now behind the company. Thus, we believe the current price presents a very attractive entry-level. Two weeks ago, RBC, Oppenheimer and Chardan sold 9.2mm shares (including the over-allotment) for the company at $5 per share providing NBSE with roughly $46mm in addition to the roughly ~$28mm reported in their December 10-Q, which is currently around ~$65mm based on their current cash burn. This gives them several years of runway to continue their progress. We view the current share price as reflecting too much pessimism and believe the stock can pretty easily double back to levels reached earlier this year in light of the cash infusion and the innovative nature of NBSE’s technology which also makes it an attractive acquisition candidate. We also anticipate the value being recognized by the market as the company continues to make progress.

            NBSE primarily develops various therapies to treat rare genetic diseases and cancers caused by mutant genes. The rapidly increasing rate of new cases of these diseases has led to significant interest in the progress and development of this company over the last few years. Along with the significant increase in cancer cases, there is strong interest in new and differentiated therapies for treatment options. The increase in demand for novel therapies such as those of NBSE ensures the company has a rapidly growing available market. The current valuation reflects a market acknowledgment of the company’s need to raise funds thereby allowing the underwriters a chance to offer their customers an attractive level to establish a position in NBSE. Thus, the recent $40mm secondary came with the usual aggressive down pricing by the underwriters and the stock appears to have found a near-term bottom, with sufficient cash and market opportunities to present a compelling case for NBSE shareholders at this level.

            NBSE’s current pipeline focuses on Huntington's disease and myotonic dystrophy. The current pandemic and rapid development of vaccines in record time utilizing mRNA technology have drawn attention to innovations such as the ability to teach our cells how to make a protein, or even a piece of a protein to trigger an immune response inside our bodies. NBSE is a part of a new class of companies accelerating the genetic revolution with a new class of synthetic medicines referred to as precision genetic medicines. NBSE has made significant pre-clinical progress and captured investors’ interest with an enormous potential addressable market. We believe the current valuation assumes too much pessimism the risk-reward has reached asymmetric levels. NBSE, utilizing a technology called PATrOL, develops highly targeted therapies that modify (turn genes off, on, splice correct or edit) the protein function of genes. PATrOL’s likely applications are very broad as the technology not only enables the gene modification, but also nucleic acid antagonists which bind DNA or RNA along with diverse nucleobases organized on a modified peptide backbone. As a platform technology capable of using PATrOL for potentially unlimited genetic disorders with the initial focus on neurological and neuromuscular diseases, NBSE provides investors an opportunity to see multiple paths of success for NBSE.

            The NeuBase company made a significant investment in developing preclinical protein-nucleic acids. The protein-nucleic acids are considered very promising, with a more specific, durable, flexible, and well-distributed next-gen antisense technology that could have broad applicability in several diseases, including lead indications Huntington's disease and myotonic dystrophy. The creation of protein acids opens the door to reducing the limitations of traditional therapeutics. NBSE’s initial pipeline consists of NT0100 for Huntington’s Disease and NT0200 for Myotonic Dystrophy, and it is anticipated that clinical trials for both therapies will begin next year.

Indeed, human beings are genetically unique. Even identical twins each carry a 6-billion letter genetic sequence or “genome” that differs. A 3-billion letter copy originates from the mother and another 3-billion letter copy is derived from the father. Together, this new blueprint is formed and becomes the roadmap for how the human body functions.

There are substantial variables in the DNA sequence between people across a population, and these differences explain the variety of nuances that constitute the variations easily observed in humans. Changes, variations, or defects in a DNA sequence can cause a downstream biological process to malfunction, resulting in a genetic disorder. Genetic disorders, called “mutations” are simply the DNA variations that characterize the difference between a change at a position that causes differences between people in general and one that causes a disorder. DNA in each cell of the body is copied into RNA, which becomes a template for producing a protein. Most of the work in cells is done by proteins. When errors in a DNA sequence occur, they are transferred to RNA and can become a damaging protein, resulting in a disorder.

NBSE’s peptide-nucleic acid AnTisense OLigonucleotide (PATrOL) platform is a new plug-and-play approach that allows NBSE to design and develop drugs that tightly bind to the miss-spelled or “mutant” RNA and prevent it from ever becoming a damaging protein. PATrOL-enabled therapies can reach organs throughout the entire body and are envisioned to be delivered through a simple infusion, removing the need for complex and invasive surgeries common to similar approaches.

Using the PATrOL platform, NBSE is developing new treatments for a variety of genetic disorders with the potential to alleviate symptoms and perhaps slow or stop disease progression. Modular and highly specific, the PATrOL platform has the potential to significantly improve upon current gene modulation technologies by combining the specificity of nucleotide engagement with the intracellular penetration and broad organ distribution capabilities of small molecule therapeutics.

Innovation

            The NeuBase company is located in the Pittsburgh Innovation District in the United States. Pittsburgh Innovation District is one of the intense and dynamic centers of innovation connected to the world-class Carnegie Mellon University, University of Pittsburgh, and UPMC. The region is known for uniting vital research, talent, technology, and entrepreneurial activities. Additionally, the region is recognized for its support of leading-edge technologies, first-class amenities, and access to capital, enabling the various companies to succeed in the market. The support and quality of the research being conducted in the region have enabled the company to become one of the most promising and creative companies in the health sector.

 Key features of PATrOL-enabled therapies include:

• Modular molecular design

• Biologically and immunologically inert

• Resistant to degradation in the body

• High specificity for target genes while minimizing off-target engagements (OTEs)

• Broad distribution throughout all tissue types

• Ability to use many chemistries for tissue and cell-type specific delivery

• No toxic intramolecular aggregation due to semi-rigid scaffold

• Potential to address dominant and recessive genetic diseases

• Ability to open up and bind to double-stranded nucleic acid targets, including the double-stranded genome

Animal Data Support for initial IND Filings – Very Encouraging

        Last year, NeuBase disclosed an additional extensive reporting of animal data consisting of biodistribution data in NHPs, and HD-specific in vitro PD data in human-derived cell lines. Broad biodistribution was demonstrated in key organ systems, including the CNS (relevant for HD/ NT0100) and skeletal muscle (relevant to DM1 / NT0200) after a single dose that was likely a class effect, with concentrations in key deep brain structures most relevant to HD (including the caudate) increasing up to two-fold over one week. On the PD front, 100% mHTT knockdown was achieved in vitro while differentially preserving wild type HTT in an assay consisting of human cells.

Strengthening the IP Portfolio

        In February, NBSE announced some key patent acquisitions for several undisclosed peptide-nucleic acid (PNA) scaffolds from Vera Therapeutics. The proactive acquisition by NBSE to augment its IP portfolio is a solid de-risking step. Having seen similar moves by platform technology companies (e.g. ALNY/MRNA/etc.), we believe that the IP move by NBSE clears an important hurdle for its PNA platform that looks to be best and first-in-class.

        NBSE’s R&D event next month could potentially provide further clarity around pre-clinical and clinical development with its lead assets (in HD and DM1). There could also be data updates at the R&D day next month as NBSE finalizes GLP/toxicology work prior to a potential IND filing for both candidates.

        Having already achieved broad organ/tissue distribution and modified RNAdriven repeat-expansion diseases (with HD/DM1 data) upon a single dose, we look forward to additional PK/PD work and GLP/tox ahead of IND filings in HD/DM1. NBSE is also speeding ahead with selective company hires and broadening its talented management bench.

        Compared to other approaches, NBSE's molecules are highly targeted (shortlength) and do not concentrate in liver, where dose-limiting toxicity often happens. NBSE's engineered molecules could self-deactivate in absence of RNA targets and do not self-aggregate. Unique features like these could open up opportunities exclusive to NBSE, such as early intervention to prevent HD even before the disease onset, given HD's hereditary nature. 

Catalyst

We see NBSE's stock potentially anticipating multiple key updates starting next month and throughout the remainder of 2021 and into 2022:

• June 8, 2021 – 12:30pm – 2:30 pm EDT - Virtual R&D Day mapping pathway/timelines for clinical development in HD/DM1
• An oncology target (to be announced) that could potentially bring in nondilutive funding as well as external validation
• Additional preclinical data on HD and DM1
• IND filings for HD/DM1 in late 2021/early 22